Delhi H.C : Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure of Rs. 19.89 lakhs was a capital expenditure as it gave the assessee an advantage of enduring nature ?

High Court Of Delhi

International Airports Authority Of India vs. CIT

Section 256

S.B. Sinha, C.J. & D.K. Jain, J.

CM No. 9 of 2002 in IT Ref. No. 37 of 1983

13th September, 2002

Counsel Appeared :

M.S. Syali, Ms. Anjana Gosain & Satyen Sethi, for the Petitioner : Sanjeev Khanna & Ms. Premlata Bansal, for the Respondent

JUDGMENT

S.B. Sinha, C.J. :

The question which arises for consideration in this application filed by the assessee herein is as to whether this Court, although has answered the reference ex parte, can recall the same ?

2. In view of the question involved in this application, it is not necessary for this Court to delve deep into the factual matrix of the matter. Suffice it to say that at the instance of the assessee, the following question had been referred for opinion of this Court by the Tribunal : “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the expenditure of Rs. 19.89 lakhs was a capital expenditure as it gave the assessee an advantage of enduring nature ?”

3. On the day when the matter was taken up, learned counsel for the assessee was not present.

4. A Bench of this Court of which one of us (D.K. Jain, J.) was a Member, by an order dt. 15th Oct., 2001 answered the said question in the affirmative i.e., in favour of the Revenue and against the assessee. An application has since been filed by the assessee alleging, inter alia, therein that after 27th Sept., 2001, when the matter was fixed for hearing, it was not shown in the cause list nor did the name of the counsel appear therein. On 15th Oct., 2001, the matter was taken up for hearing and although nobody had appeared on behalf of the petitioner, instead of returning the question unanswered, this Court went into the merits of the matter and passed the aforementioned judgment.

5. Mr. Sanjeev Khanna, the learned counsel appearing on behalf of the Revenue, has raised a question of demur to the effect that this Court has no jurisdiction to recall the said order inasmuch as while exercising the power under s. 256 of the IT Act, 1961 (in short “the Act”) the Court exercises a limited jurisdiction. The learned counsel would submit that the power of review having not expressly or by necessary implication been conferred upon this Court in terms of the provisions of the Act, having answered the reference, it has become functus officio and thus it cannot entertain the said application. Reliance in this connection has been placed on an unreported judgment of this Court in J.N. Sahni vs. ITAT in CWP No. 1105 of 1979 decided on 31st Jan., 2002 [reported at (2002) 174 CTR (Del) 367—Ed.], Director of IT (Exemption) vs. ITAT (1999) 153 CTR (Del) 353 : (1998) 232 ITR 688 (Del), Mathura Prasad Ram vs. CIT (1994) 116 CTR (Ori) 355 : (1993) 200 ITR 451 (Ori) and K.T.M.S. Mahamood vs. CIT (1997) 140 CTR (Mad) 288 : (1997) 228 ITR 121 (Mad).

6. The learned counsel would contend that even this Court in a case of this nature cannot exercise its power of procedural review. Reference has been to Grindlays Bank Ltd. vs. Central Government Industrial Tribunal AIR 1981 SC 606.

7. Mr. Syali, the learned senior counsel appearing on behalf of the assessee, on the other hand, would submit that this Court has an inherent power to recall its own order. In support of the said contention, reliance has been placed on Mangat Ram Kuthiala vs. CIT (1960) 38 ITR 1 (Punj), Pierce Leslie India Ltd. vs. CIT (1988) 71 CTR (Kar) 183 : (1988) 174 ITR 626 (Kar) and CIT vs. Bhagirath & Bros. (1997) 139 CTR (MP) 239 : (1997) 225 ITR 483 (MP).

8. In terms of s. 256 of the Act, a reference is made to High Court. High Court, therefore, is not a persona designata.

9. While exercising its power, in our opinion, the High Court still acts as a constitutional authority and thus can exercise its jurisdiction in a manner as it may think fit and proper. High Court is not a creature of any statute. It is now a well-settled principle of law that a power of substantive review is required to be conferred by statute. No such power is required to be expressly conferred upon a Court in relation to exercise of its power of procedural review. Such a power inheres in every Court, more so in the High Court.

10. In J.N. Sahni’s case (supra), this Court referred to the decision in CIT vs. K.L. Bhatia (1990) 84 CTR (Del) 152 : (1990) 182 ITR 361 (Del) wherein Kirpal, J., as his Lordship then was held : “As we have already observed, the Tribunal is a creation of the statute. It is an admitted case, and it is now well-settled, that though the Tribunal has no inherent power of reviewing its order on merits, the Tribunal has incidental or ancillary powers which can be exercised by it. But such power cannot be invoked to rehear a case on merits…”

11. It was further observed : “The Tribunal in the absence of any express power cannot be said to have a power of substantive review. The Tribunal has merely the power to amend its order. While exercising the said power it cannot recall its order. The expression ‘amendment’ must be assigned its true meaning. While an order of amendment is passed, the order remains but when an order is recalled it stands obliterated. It is well-settled that what cannot be done directly, cannot be done indirectly. The review of its own order by the Tribunal is forbidden in law, it cannot be permitted to achieve the same object by exercising its power under sub-s. (2) of s. 254. The Tribunal does not have an inherent power of review.”

12. The High Court, however, being a Court of record within the meaning of Art. 215 of the Constitution of India, stands on a different footing.

13. In Grindlays Bank Ltd.’s case (supra), the apex Court made a distinction between the power of substantive review and that of procedural review.

14. The Act does not lay down the procedure for exercise of power of the High Court. The High Court while exercising its power thereunder, must follow the procedures which are followed by it ordinarily. In Grindlays Bank Ltd.’s case (supra), interpreting s. 11(1) of the Industrial Disputes Act, the apex Court held that when the Tribunal had been conferred with the power to follow such procedures as the arbitrator or the other authority may think fit, are of widest amplitude. It was held : “10. When sub-s. (1) of s. 11 expressly and in clear terms confers power upon the Tribunal to regulate its own procedure, it must necessarily be endowed with all powers which bring about an adjudication of an existing industrial dispute, after affording all the parties an opportunity of a hearing. We are inclined to the view that where a party is prevented from appearing at the hearing due to a sufficient cause, and is faced with an ex parte award, it is as if the party is visited with an award without a notice of the proceedings. It is needless to stress that where the Tribunal proceeds to make an award without notice to a party, the award is othing but a nullity. In such circumstances, the Tribunal has not only the power but also the duty to set aside the ex parte award and to direct the matter to be heard afresh.”

15. The contention of Mr. Khanna is to the effect that the opinion of the apex Court was rendered having regard to the provisions of cl. (d) of sub-s. (1) of s. 11 in terms whereof the Tribunal could exercise the same powers as are vested in the Civil Court in the CPC in respect of such matters as may be prescribed. If the High Court being a Constitutional Court and thus having the plenary jurisdiction, can frame its own rules, there cannot be any doubt whatsoever that it can regulate its own procedure. The High Court is not only a Court of law but also a Court of justice. It is beyond any cavil of doubt that the High Court ex debito justitiae can pass such orders as in its opinion, will render complete justice between the parties. No rule has been prescribed by the High Court in terms whereof the procedure is to be followed in a reference under s. 256. In the aforementioned situation, the Court can regulate its own procedure as it may deem fit and proper for doing complete justice between the parties. In this view of the matter, the High Court can follow the procedure analogous to those laid down in the CPC.

16. In K.T.M.S. Mahamood’s case (supra), a Division Bench of the Madras High Court went into the merit of the matter to arrive at a finding as to whether a sufficient cause has been made out to recall the order or not. It held that the Limitation Act would not be applicable to a case filed before this Court under s. 256 of the Act. It referred to the notice prescribed under r. 6 under the Appellate Side Rules, 1965 wherein it was stated that in default of the appearance of the assessee, the same should be heard and determined in his absence. It was opined : “…It is also significant to note that the Limitation Act, 1963, will not be applicable in filing the tax cases. If the Limitation Act is applicable then we have got to see whether there is any reasonable cause for condoning the delay. Inasmuch as the Limitation Act is not applicable to tax case reference, further probe into this matter does not arise. Under s. 256 of the IT Act, 1961, this Court is functioning with advisory jurisdiction in giving its opinion on the question referred to it. Therefore, dismissal of a tax case does not arise in this case. This Court under s. 256 of the IT Act, 1961, can either answer the question referred to it or return the question unanswered. Under such circumstances, setting aside the order of dismissal in a tax case under s. 151, CPC, is also not in accordance with the provisions contained in the IT Act, 1961.”

17. With respect, we cannot subscribe to the aforementioned view. If the Limitation Act, 1963 is not applicable, evidently no period of limitation has been fixed thereby and as such the question of entertaining an application for condoning the delay would not arise.

18. The Court did not consider the question as to whether in a situation of this nature, the Court can exercise its power of procedural review or not, apart from exercising its inherent jurisdiction. The Court, with respect, also, in our opinion, did not correctly read the judgment of the Supreme Court in Jaipur Mineral Development Syndicate vs. CIT 1977 CTR (SC) 92 : (1977) 106 ITR 653 (SC) wherein it was held : “A party or its counsel may be prevented from appearing at the hearing of a reference for a variety of reasons. In case such a party shows, subsequent to the order made by the High Court declining to answer the reference, that there was sufficient reason for its non-appearance, the High Court has the inherent power to recall its earlier order and dispose of the reference on merits. There is nothing in any of the provisions of the Indian IT Act, 1922, which either expressly or by necessary implication, stands in the way of the High Court from passing an order for disposal of the reference on merits. The High Court should not be loath to exercise the inherent power of recalling an earlier order provided that the party concerned approaches the Court with due diligence and shows sufficient cause for its non-appearance on the date of hearing.”

19. It will not be correct to contend, as has been sought to be done by Mr. Khanna, that as the Division Bench of the Madras High Court distinguished the case and held that the Court will have the power to recall when the reference has not been answered. Such a distinction, in our opinion, does not exist. Having regard to the said decisions, the Court will become functus officio even if the reference is returned unanswered.

20. In Dr. Kashinath G. Jalmi vs. Speaker 1993 (3) JT 594 (SC), the apex Court was dealing with the power of substantive review by the Speaker of Assembly in terms of Tenth Schedule of the Constitution of India wherein it has merely been held that in absence of any express power of review, the Speaker cannot exercise the said power.

The said decision cannot be said to have any application whatsoever inasmuch as the Speaker is a creature of a statute.

21. In Budhia Swain vs. Gopinath Deb (1999) 4 SCC 396 whereupon strong reliance has been placed by Mr. Khanna, Lahoti, J., observed : “6. What is a power to recall ? Inherent power to recall its own order vesting in Tribunals or Courts was noticed in Indian Bank vs. Satyam Fibres (India) (P) Ltd. (1996) 5 SCC 550 vide para 23, this Court has held that the Courts have inherent power to recall and set aside an order (i) obtained by fraud practiced upon the Court,(ii) when the Court is misled by a party, or (iii) when the Court itself commits a mistake which prejudices a party. In A.R. Antulay vs. R.S. Nayak (1988) 2 SCC 602/1988 SCC (Cri.) 372 : AIR 1988 SC 1531, para 130 (vide para 130), this Court has noticed motions to set aside judgments being permitted where (i) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all and was shown as served or in ignorance of the fact that a necessary party had died and the estate was not represented, (ii) a judgment was obtained by fraud, (iii) a party has had no notice and a decree was made against him and such party approaches the Court for setting aside the decision ex debito justitiae on proof of the fact that there was no service. In Corpus Juris Secundum (Vol. XIX) under the chapter ‘Judgment—Opening and Vacating’ (paras 265 to 284, at pp. 487-510) the law on the subject has been stated. The grounds on which the Courts may open or vacate their judgments are generally matters which render the judgment void or which are specified in statutes authorizing such actions. Invalidity of the judgment of such a nature as to render it void is a valid ground for vacating it at least if the invalidity is apparent on the face of the record. Fraud or collusion in obtaining a judgment is a sufficient ground for opening or vacating it. A judgment secured in violation of an agreement not to enter a judgment may be vacated on that ground. However, in general, a judgment will not be opened or vacated on grounds which could have been pleaded in the original action. A motion to vacate will not be entered when the proper remedy is by some other proceedings, such as by appeal. The right to vacation of a judgment may be lost by waiver or estoppel. Where a party injured acquiesces in the rendition of the judgment or submits to it, waiver or estoppel results.

In our opinion a Tribunal or a Court may recall an order earlier made by it if (i) the proceedings culminating into an order suffer from the inherent lack of jurisdiction and such lack of jurisdiction is patent, (ii) there exists fraud or collusion in obtaining the judgment, (iii) there has been a mistake of the Court prejudicing a party, or (iv) a judgment was rendered in ignorance of the fact that a necessary party had not been served at all or had died and the estate was not represented.”

22. In A.R. Antulay vs. R.S. Nayak AIR 1988 SC 1531, the apex Court clearly and in unequivocal terms applied the maxim actus curiae neminem gravabit in following words : “83 …..When these factors are brought to the notice of this Court, even if there are any technicalities this Court should not feel shackled and decline to rectify that injustice or otherwise the injustice noticed will remain forever a blot on justice…” Ranganath Misra, J. (as his Lordship then was) observed : “108… If a mistake is detected and the apex Court is not able to correct it with a view to doing justice for fear of being misunderstood, the cause of justice is bound to suffer and for the apex Court the apprehension would not be a valid consideration. Today it is Abdul Rehaman Antulay with a political background and perhaps some status and wealth but tomorrow it can be any ill-placed citizen. This Court while administering justice does not take into consideration as to who is before it. Every litigant is entitled to the same consideration and if an order is warranted in the interest of justice, the contention of Mr. Jethmalani cannot stand in the way as a bar to the making of that order.”

23. In Director of IT (Exemption)’s case (supra) it was held : “So far as the order dt. 7th Nov., 1994, rejecting the petitioner’s application as barred by time is concerned, the same was certainly erroneous as the limitation for filing an application under s. 256 (1) of the Act would commence from the date of receipt of the order by the CIT, as held by the Delhi High Court in CIT vs. Arvind Construction Co. (P) Ltd. (1991) 94 CTR (Del) 211 : (1992) 193 ITR 330 (Del). Ordinarily, this Court would have set aside the order dt. 7th Nov., 1994, in exercise of writ jurisdiction of this Court directing the Tribunal to entertain the application holding it as having been filed within limitation and adjudicate upon the same on the merits. However, on the facts and circumstances pointed out by learned counsel for the respondent-assessee, we are of the opinion that the present one is a case where the discretionary writ jurisdiction of the High Court may not be exercised in favour of the petitioner.”

24. However, in Mangat Ram Kuthiala’s case (supra), Punjab High Court has held : “(vi) that it was a settled rule that a judicial Tribunal could recall and quash its own order in exceptional cases when it was shown that it was obtained by fraud or by palpable mistake or was made in utter ignorance of a statutory provision and the like, and for the application of that rule the class of the Tribunal was not a material matter but what was of substance and material was the nature of the proceedings before it : if the proceedings were in the nature of judicial proceedings, then irrespective of the class of the Tribunal the rule applied; that the Tribunal had inherent jurisdiction to entertain the first application dt. 13th Feb., 1950;”

25. Yet again in Pierce Leslie India Ltd.’s case (supra), the Karnataka High Court has answered the question raised before it in the following terms : “This Court has got inherent power to entertain an application praying for setting aside an order made in reference under s. 256(1) of the IT Act, 1961, on the ground that the order made was palpably erroneous or has resulted in miscarriage of justice and set aside the order if it is found to be so and to pass a fresh order in accordance with law.”

26. However, we may add that we have reservations about certain observations made therein.

27. In Bhagirath & Bros. (supra), Madhya Pradesh High Court held that the Court has an inherent power to restore application.

28. The question as to whether even a statutory Tribunal has an inherent power or not is no longer res integra having regard to the decision of the apex Court in Special Ref. No. 1 of 1991 in the matter of Cauvery Water Disputes Tribunal, In re AIR 1992 SC 522 in the following words :

“27… The limited question we are required to answer is whether the order granting interim relief is a report and a decision within the meaning of s. 5(2) and is required to be published in the Official Gazette under s. 6 of the Act. It is needless to observe in this connection that the scope of the investigation that a Tribunal or a Court makes at the stage of passing an interim order is limited compared to that made before making the final adjudication. The extent and the nature of the investigation and the degree of satisfaction required for granting or rejecting the application for interim relief would depend upon the nature of the dispute and the circumstances in each case. No hard and fast rule can be laid down in this respect. However, no Tribunal or Court is prevented or prohibited from passing interim orders on the ground that it does not have at that stage all the material required to take the final decision. To read such an inhibition in the power of the Tribunal or a Court is to deny to it the power to grant interim relief when reference for such relief is made. Hence, it will have to be held that the Tribunal constituted under the Act is not prevented from passing an interim order or direction, or granting an interim relief pursuant to the reference merely because at the interim stage it has not carried out a complete investigation which is required to be done before it makes its final report and gives its final decision. It can pass interim orders on such material as according to it is appropriate to the nature of the interim order.”

In Taylor vs. Lawrence (2002) All ER 353, it was held that the Court of Appeal had a residual jurisdiction to reopen an appeal which it had already determined in order to avoid real injustice in exceptional circumstances. In terms of the rules of this Court, the name of the lawyer is required to be published in the cause list. Ordinarily, publication of the name of the lawyer is construed to be notice to the parties, if not notified earlier. In that view of the matter, the Court did not have any jurisdiction to proceed with the reference as the assessee had suffered owing to a mistake on the part of the Court and, thus, in our opinion, the inherent power of this Court can be exercised to recall the judgment, as thereby the assessee has suffered a serious prejudice. It is now a well-settled principle of law that justice is not only to be done but manifestly seen to be done. In ‘Natural Justice’ by Pal Jackson, it was stated : “It is the recognition of the importance of the requirement that justice is seen to be done that justifies the giving of a remedy to a litigant even when it may be claimed that a decision alleged to be vitiated by a breach of natural justice would still have been reached had a fair hearing been given by an impartial Tribunal. The maxim is applicable precisely when the Court is concerned not with a case of actual injustice but with the appearance of injustice, or possible injustice. In Altco Ltd. vs. Sutherland (1971) 2 Lloyd’s Rep. 515 Donaldson, J. said that the Court, in deciding whether to interfere where an arbitrator had not given a party a full hearing, was not concerned with whether a further hearing would produce a different or the same result. It was important that the parties should not only be given justice, but, as reasonable men, know that they had justice or ‘to use the time, hallowed phrase’ that justice should not only be done but be seen to be done. In R.V. Thames Magistrates’ Court, ex p. Polemis (1974) 1 WLR 1371, the applicant obtained an order of certiorari to quash his conviction by a stipendiary Magistrate on the ground that he had not had sufficient time to prepare his defence. The Divisional Court rejected the argument that, in its discretion, it ought to refuse relief because the applicant had no defence to the charge.

It is again absolutely basic to our system that justice must not only be done but must manifestly be seen to be done. If justice was so clearly not seen to be done, as on the afternoon in question here, it seems to me that, it is no answer to the applicant to say : ‘Well, even if the case had been properly conducted, the result would have been the same.’ That is mixing up doing justice with seeing that justice is done’ (per Lord Widgery, C.J. at p. 1375) : Stringer vs. Minister of Housing (1970) 1 WLR 1281, 1297. In Maxwell vs. Department of Trade (1974) 1 Q.B. 523, 540 Lawton, L.J. expressed a similar idea when he said, ‘Doing what is right may still result in unfairness if it is done in the wrong way.’ Barrs vs. British Wool Marketing Board (1957) SC 72, 82, per Lord President (Clyde). It is because the assurance that justice has been seen to be done is, in itself, an important element in the public confidence in the settlement of disputes, whether in the Courts or by other bodies, that, for example, the rules of natural justice may apply even to what might be regarded as ‘open and shut cases’. Megarry, J. explained why, when warning of the danger of regarding any case as ‘open and shut’; ‘When something is obvious’ (it may be said), ‘why force everybody to go through the tiresome waste of time involved in framing charges and giving an opportunity to be heard ? The result is obvious from the start.’ Those who take this view do not, I think, do themselves justice. As everybody who has anything to do with the law well knows, the path of the is strewn with examples of open and shut cases which, somehow, were not of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change. Nor are those with any knowledge of human nature who pause to think for a moment likely to underestimate the feelings of resentment of those who find that a decision against them has been made without their being afforded any opportunity to influence the course of events [John vs. Rees (1970) Ch. 345, 402].”

32. For the reasons aforementioned, we are of the opinion that it is a fit case wherein this Court should, in exercise of its inherent jurisdiction, recall the judgment dt. 15th Oct., 2001. CM No. 9 of 2002 is disposed of accordingly, with no order as to costs. Let the reference case be placed before an appropriate Bench.

[Citation : 286 ITR 323]

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